International trade and finance is complex, expensive, and paper-intensive. Both buyers (importers) and vendors (exporters) are required to prepare, exchange, and process numerous commercial and financial documents associated with each transaction. High-volume exporters and importers are particularly faced with overwhelming paperwork, expense, and administrative challenges.
Presently, global trade transactions involve a rudimentary yet error-prone process. Assume, for example, that a buyer located in the United States wants to purchase goods from a vendor in the Philippines. To initiate the transaction, the buyer will customarily prepare and submit to the vendor a purchase order containing information such as the items or products desired, the quantity, and other relevant details, such as expected delivery date and location, for example. The buyer may also include financing documents, such as a letter of credit or open account documents, for example, which may be prepared by the buyer's bank and help to speed up the order. A letter of credit is an instrument under which the issuer (usually a bank), at the buyer's request, agrees to honor the draft or other demand for payment made by the vendor, as long as the draft or demand complies with specified conditions, and regardless of whether any underlying agreement between the buyer and the vendor is satisfied. An open account, on the other hand, is an unpaid or unsettled account that is left open for ongoing debt and credit entries and that has a fluctuating balance until either party finds it convenient to settle and close, at which time there is a single liability. Both forms of payment are commonly used in international trade transactions.
Back to the hypothetical, assuming the documents are in proper order the vendor will deliver a request for payment (or invoice) to the buyer, along with shipping documents detailing delivery date and location, for example. The buyer reviews these documents for accuracy and completeness and arranges for or authorizes payment, usually through its own bank. The exchange of documents between buyers and vendors is commonly done through standard mail delivery systems, such as government mail services and private express delivery services, for example. More sophisticated buyers and vendors may use more immediate forms of communication, such as the Internet and other forms of electronic communication, for example.
Though the above process seems simple and straightforward, it results in numerous inefficiencies. Documents, for example, may not arrive in a timely fashion or may not be easily interpreted by the recipient. This can lead to needless confusion and delay in the delivery and negotiation of order details, giving rise to excess fees and costs. Further, the terms of an incoming purchase order may not be properly reconciled with a vendor's invoice, requiring the parties to examine each of the documents to ensure accuracy and completeness, resulting again in excess fees and costs. Also, many foreign vendors, particularly those in lesser developed countries, lack access to present-day technologies that enable more efficient delivery and processing of documents, such as the Internet, for example. Further complicating matters, delivery of the products or items to the buyer must comply with international, foreign, federal, and/or state regulations, and must thus be maintained in a legible and complete manner.
These and other problems exist.